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Total stressed loans in banking unlikely to increase significantly: Crisil

By:  GK Gupta (ET) , Place:  Chandigarh ,  Update:15 Sep 2017
 
The total stressed loans in the banking system is unlikely to increase significantly due to a recovery in corporate credit quality, lower interest rates, improved capital structures and efficiency gains, rating agency CrisilBSE 1.20 % said. 

“With the majority of stressed assets now recognised as NPAs, the rest of the corporate loans portfolio of banks can be expected to perform better over the medium term. However, the performance of MSME and agriculture loans could see some deterioration mainly due to the impact of Goods and Services Tax (GST) and farm loan waivers, respectively. But these are unlikely to stress bank balance sheets the way large corporate NPAs did,” said Gurpreet Chhatwal, president, Crisil Ratings. 

The Standard & Poors owned rating agency estimates stressed assets in the banking system to be around Rs 11.5 lakh crore, or about 14% of total advances. “About two-thirds of the overall stressed assets in the banking system has already been recognised by banks as NPAs as on March 31, 2017. The stressed assets include both reported gross non-performing assets (NPAs) and standard assets that are under pressure currently and could deteriorate into NPAs over the medium term,” Crisil said. 

Going forward, loans to micro, small and medium enterprises (MSME) which are under pressure due to the impact of demonetisation and the new GST regime and farm loan waivers could spurt NPAs. But banks are better placed in these sectors because exposures are not as chunky as corporate loans. 
 Going forward, loans to micro, small and medium enterprises (MSME) which are under pressure due to the impact of demonetisation and the new GST regime and farm loan waivers could spurt NPAs. But banks are better placed in these sectors because exposures are not as chunky as corporate loans. 

Sluggish economic growth, continued stress in some sectors, and slow place of resolution proceedings have been constraining recoveries for banks said Krishnan Sitaraman, senior director, Crisil Ratings. 


 
 
 
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